Ratzlaff Company Has a Current Production Level of 20,000 Units

question 149

Multiple Choice

Ratzlaff Company has a current production level of 20,000 units per month.Unit costs at this level are: Current monthly sales are 18,000 units.Jim Company has contacted Ratzlaff Company about purchasing 1,500 units at $2.00 each.Current sales would NOT be affected by the one-time-only special order, and variable marketing/distribution costs would NOT be incurred on the special order.What is Ratzlaff Company's change in operating profits if the special order is accepted?

• A)$400 increase in operating profits
• B)$400 decrease in operating profits
• C)$1,800 increase in operating profits
• D)$1,800 decrease in operating profits
• E)$1,500 increase in operating profits

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Definitions:

Face Value

The nominal value stated on a financial instrument, such as a bond or stock, representing its worth at issuance or maturity.

Market Value

The current price at which an asset or service can be bought or sold in the open market.

Upward Sloping Yield Curve

A graph showing higher interest rates for longer-term debt compared to shorter-term debt, indicating investor anticipations of rising interest rates in the future.

Normal Curve

The normal curve, or normal distribution, is a bell-shaped curve that shows the probability distribution of a continuous random variable, where most occurrences take place near the mean.